V- (15 points) On Jan 3, 2012, BNM oi1 Company purchage d an oi1 reserve for $s0
ID: 2600324 • Letter: V
Question
V- (15 points) On Jan 3, 2012, BNM oi1 Company purchage d an oi1 reserve for $s00,000,000 and apent additional $10, 000,000 to im prove it and make it ready for eperation. The comp any estimated that the crude oil reserve has 25,000,000 barrels of oll. During 2012 and 2013 the amount of crude oil produced amounted to 3,600, 0oo and 5,100,000 barrels respectively burnalize the acquisition of the oil reserve on Jan.3, and the il production (depletion) on Dec.2012 and Dec.2013. VI (10 pointo) -The following coste are related to tangible and intangible assets Indicate whether they should be capitalized (asset)) or written- of (expense or loss) when they occur: a) cost of new engine that extends the life of a vehicle. b) Cost of legal fees, survey fees, and cost of removing a building from land before a new building can be buiit. c) cost of changing oil of a vehicle. d) Cash received from selling fixtures of an old building removed to clear the land for a new bulding e) Cost of interest on borrowed money during construction of a buil VII- (10 points) Journalize the following transactions related to patents on SBT Co.books: a) Jan. 2,2012, the Co. purchased a patent for $630,000. The patent has 12 years of legal life but it's useful economic life is estimated to be 5 years. Journalize the acquisition and amortization transactions on Jan, 2nd and Dec. 31 2012. b) during 2012, DGK Co. developed a drug in its lab. and received a patent for it. The estimated cost of the research that led t the patent is $i,250,000 Journalize this transaction on Dec.31, 2012 ,2013Explanation / Answer
V)
Journal Entries :
Date Accounts Titles and explanation Debit $ Credit $ Jan 3, 12 Oil Reserve ($500m + $10m) 510m Cash 510m (being the cost of exploration and development recorded) Dec 31 12 Depletion Expense 73.44m Accumulated Depletion - Oil Reserve 73.44m (being depletion for 2012 recorded [($510m/25m)*3.6m] Dec 31 13 Depletion Expense 104.04m Accumulated Depletion - Oil Reserve 104.04m (being depletion for 2012 recorded [($510m/25m)*5.1m] )Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.